Inventory glossary

What is Days inventory outstanding?

Days inventory outstanding (DIO) is the average number of days it takes a store to sell through its inventory, measured from the time stock is bought to the time it is sold.

DIO tells a store owner how much cash is sitting on shelves instead of in the bank. A high DIO can mean you are overbuying or that products are moving slower than expected, while a very low DIO can signal you are at risk of running out of stock.

Use DIO as a check-in metric, reviewed monthly or quarterly, alongside turnover and sell-through rate. If DIO is rising over time for a product line, it is a signal to slow down future purchase orders or run a promotion before cash gets stuck in slow-moving stock.

Formula

DIO = (Average Inventory / Cost of Goods Sold) x Number of Days

Example

A candle store has average inventory worth $20,000 at cost and a cost of goods sold of $146,000 for the year. DIO = (20,000 / 146,000) x 365 = 50 days. This means stock sits for about 50 days on average before it sells.

Common mistakes

  • Using ending inventory instead of average inventory, which skews the result if stock levels swing a lot during the period.
  • Comparing DIO across very different product categories without separating them, since fast and slow movers get blended together.
  • Forgetting that DIO is a lagging, backward-looking number and does not predict future stockouts or overstock on its own.

Days inventory outstanding and SteadyShelf

SteadyShelf does not calculate DIO directly, but its per-SKU sales forecasts and order-by dates help you buy closer to actual demand, which tends to lower how long stock sits before selling.

Work it out for your own products with our free tool: Inventory turnover calculator.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Inventory turnover · Days of supply · Cost of goods sold · Stock cover · Sell-through rate

Full inventory glossary

FAQ

Is a lower DIO always better?

Yes. A lower DIO generally means your cash is tied up for less time, but it should be read alongside sell-through rate and stockout risk, not alone.

Can DIO be different for different products in the same store?

Yes. A store with several product lines can have one blended DIO but very different numbers per category, so checking it per SKU or product type is more useful for reorder decisions.

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